President Barack Obama and Gov. Pat Quinn have recommended an increase in the minimum wage as a way to increase the earning of low-wage earners. The increased minimum wage would result in earnings of a full-time worker being closer to earning a "livable income." This is certainly a laudable goal.

Increasing the minimum wage would be beneficial for workers at the low end of the wage scale, but possible negative effects also need to be considered. Research is not definitive, but there is evidence that increases in the minimum wage will decrease employment opportunities. It is possible that the increase in the minimum wage will result in some businesses closing or reducing payrolls because of the increased cost of doing business.

It is also possible that as a result of the increased minimum-wage some companies may choose to move operations to other countries. If this happens, those with low skills will be affected the most, and these are the workers that will have the most difficulty in finding alternative employment.

A secondary impact of an increase in minimum wage is an increase in the prices of goods produced by industries using minimum-wage workers. In fast food, for example, an increase in minimum wage from $7.25 to $10 represents a 38 percent increase in wages. In the fast-food industry, labor costs are about 30 percent of the cost of production; thus to maintain current profit margins, the price of fast food would need to increase by 11 percent: a $5 sandwich would increase to $5.50. Because fast food is disproportionately consumed more by low-income groups, they would be adversely affected.

An alternative approach to increasing earning without the potential negative consequences would be adopting a negative income tax. Using this approach, individuals would receive a payment from the government based on their earned income. If the floor was established at $15,000, a person who has no income would receive a payment of $15,000.

With a 50 percent negative income tax, if a person earned the present minimum wage of $7.25 an hour, or $14,500 a year, their payment from the government would be reduced by 50 percent of the $14,500, or by $7,250. Their total income would be $22,500.

This approach would not have the potential impact of reduced employment or increased prices due to higher labor costs and has an added advantage of replacing some if not all of the income-support programs provided by the federal government.

This approach would accomplish the social goal of providing a safety-net level of income without distorting the operation of the labor market and the negative consequences that might result.